Affordable housing push could lead to tax hike frenzy

By William MacKenzie,

Government just can’t seem to stop wanting more money.

In a strange twist, now there’s a move to make life less affordable for many Oregonians in order to promote affordable housing.

Oregon Governor Tina Kotek’s Housing Production Advisory Council has just submitted a 20-page draft report, HPAC Policy Recommendations, on ideas on how to address the affordable housing crisis. And, of course, the ideas include raising more money. The Taxpayer Association of Oregon revealed the report on Jan. 10, 2024.

Remember when voters passed Measure 50 in 1997? It introduced maximum assessed value (MAV), which acts as a “cap” on the growth of taxable (assessed) value for most property. MAV growth is limited to 3 percent per year. Combined with permanent tax rates, Measure 50 effectively limited tax increases, except under specific circumstances. Kotek’s Housing Production Advisory Council is proposing raising that to 5%.

Own a vacation property in Bend?  Kotek’s Housing Production Advisory Council is proposing eliminating the Mortgage Interest Deduction for Second Homes (i.e., abolishing the income tax deduction for interest paid on second homes).

Drive a gas car?   Kotek’s Housing Production Advisory Council is proposing doubling fuel taxes.

On section 7 (Page 16/17) it lists 5 suggestions to raise new revenue (as shown below):

7. Generate new, state-level revenue to fund critical local infrastructure.
   New revenue generation to be limited to duration of HPAC Timeline (i.e., sunset in 2032)
   and in support of the related work plan topics described below. Potential sources
   include:
8. Revenue Source and Annual Revenue Generated (Legislative Revenue Office,
   2023, p. B7, FY 23-24 dollars).
9. Increase all personal income tax brackets by ½ percentage point.
   $699 Million
10. Establish Special $1 per $1,000 real property tax assessment outside of
    Measure 5.
    $504 Million
11. Implement 0.5% Retail Sales Tax.
    $501 Million
12. Implement 0.5% Payroll Tax.
    $620 Million
13. Double Fuel Tax.
    $686 Million

The report also proposes:

Reform Oregon’s tax system to encourage development of needed housing and provide
adequate revenue for local governments to support housing production.
a. Taxes are both a tool to raise revenue for government and to shape taxpayer behavior.
Attaining the Governor’s desired housing production goals will require significant new
revenue; this recommendation highlights actions that can address revenue shortfalls and
encourage a shift in taxpayer behavior to support housing production.
b. Potential actions include (but are not limited to):
i. Targeted Measure 50 Reform:

1. Increase annual Maximum Assessed Value change to 5%.
2. Authorize voters to increase the permanent levy of their local
3. Exempt Cities and Counties from compression.
   Adopt Land Value Tax
   iii. Eliminate Mortgage Interest Deduction for Second Homes (i.e., abolish income
   tax deduction for interest paid on second homes).
   iv. Enact temporary property tax exemption for new housing at 120% AMI or below.
   v. Reduce or Eliminate Tax Expenditures (i.e., tax exemptions) not related to
   housing.

The report notes that four lawmakers, from both parties, sit as members on Kotek’s Council.   They are:

• Senator Dick Anderson(R – Lincoln City)
• Senator Kayse Jama(D – Portland)
• Representative Vikki Breese Iverson(R – Prineville)
• Representative Maxine Dexter(D – Portland)

There are also a number of community members appointed to the Council by Governor Kotek.

They need to hear from taxpayers.

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Gubernatorial Appointments:

• Co-chair J.D. Tovey– rural Oregon and an enrolled member of the Confederated Tribes of the Umatilla Indian Reservation – land use, building codes and housing development
• Co-chair Damien Hall– Metro- land use, and affordable and market housing development
• Daniel Bunn– Southern Oregon – land use and financing market housing
• Thomas Cody– Metro area – affordable and market housing development
• Deborah Flagan– Central Oregon – market housing development and construction
• Ernesto Fonseca– Metro area – affordable and market housing development and financing affordable housing
• Elissa Gertler– Oregon Coast – land use and financing affordable housing
• Riley Hill– rural Oregon – land use and market housing development
• Natalie Janney– Willamette Valley area – land use, market housing development
• Robert Justus– Metro area – affordable and market housing development
• Joel Madsen– Columbia Gorge – affordable housing development and financing
• Ivory Mathews– Metro area – affordable housing development and financing
• Erica Mills– Southern Oregon – financing affordable and market housing
• Eric Olsen– Willamette Valley area – construction, market housing development
• Gauri Rajbaidya– Metro area – affordable and market housing development
• Karen Rockwell– Oregon Coast – affordable and market housing development
• Margaret Van Vliet– Metro area – financing market and affordable housing, and affordable housing development
• Justin Wood– Metro – construction and market housing development